Retirees and Newbie Investors: How to Beat Inflation and Market Volatility in 2022

The broader stock market correction has not affected everyone equally. Warren Buffett is doing incredibly well this year in a violent risk reversal. Never criticize the Oracle of Omaha, even if he drags his feet in prosperous times! Now that the tables have turned and fear is the main emotion on Wall and Bay Street, I think it’s time to step back and consider where investors should be at this point.

Investors are currently in a difficult situation. There is no way around this. Stocks have been very volatile as valuations have reset on some of the more expensive names. The growth is over and momentum hunters have been hit hard, with names like Shopify on course to lose over 70% of their value from peak to peak. It’s not a friendly environment for newbie investors with no stomach or retirees with few options outside of the “risky” stock market.

Simply put, Canadian investors have it tough today. Bonds and money are not rewarding. With inflation continuing to soar, it can be argued that cash and cash equivalents, perceived as non-risky assets (with no risk of capital depreciation), are the new “risky” assets from the point of view of power. purchase. Inflation is incredibly high, and those who hoard cash will see their wealth slowly wither away until central banks can put the inflation genie back in the bottle.

Twin crisis conditions could wreak havoc on markets

At the same time, there is a double crisis scenario which is hurting the appetite for equities. The horrific Ukraine-Russia crisis and the return of COVID lockdowns in China (a so-called Stealth Omicron might be to blame) has the reopening of stocks and growth plays leading the charge to the downside. With the U.S. Federal Reserve walking a tightrope, it’s hard to say whether cash hoarders or equity investors will be hardest hit over the next year. I would argue that investors need to find the right mix of cash and stocks to dodge and weather another year or two of inflation and volatility.

For retirees with lots of money, it’s such a terrible situation, inflation is eating away at their true wealth. That’s why shopping is essential, despite recent stock market volatility. Yes, the double crisis and the correction of the S&P 500 are scary. But is it scary enough to justify a guaranteed loss of purchasing power of 4-7% at the hands of inflation by standing still? I would say no. That’s why investors with too much money should look to bargain hunt today. Like it or not, there is no “safe” alternative these days for those looking to preserve and create wealth. The next best thing? It’s not Bitcoinbut cheap stocks with lower betas.

Lower betas mean lower correlation with the broader stock market. Add dividends, which can act as shock absorbers, and you too can position yourself like Warren Buffett. You can get involved, without worrying as much as some beginners are these days! It doesn’t have to be difficult for those who don’t want to go bargain hunting.

A one-stop-shop for low volatility and resilience to inflation

BMO Low Volatility Canadian Equity ETF (TSX:ZLB) does the job. It is a hand-picked basket of TSX stocks with lower betas, safe dividends and premium long-term characteristics.

The ZLB is down just 0.5% from its peak, while the Nasdaq 100 is in bear market mode. Indeed, ZLB pays off big, but it is essential to remember that ZLB will not save investors from corrections or crashes all the time. For example, the stock market crash of 2020 did not spare ZLB. He fell as hard as almost everything else. This time around, ZLB is holding firm. I suspect the same is true as we go through a turbulent year.

Year-to-date, ZLB has grown over 2% and 42% over the past five years. It’s a great return to help all investors stay ahead of inflation in these difficult times. ZLB will not make you rich. But it can be an invaluable investment to keep you ahead in a game that has become so much harder for many.